Practical Application of Theory

Cultural differences in international consumer behavior

(based on Wal-Mart example)

Verfasserin:

Julia Zaroubina

Matrikelnummer: 2960090

23. Januar 2013

Contents

Introduction

1. Practical Application of Theories

1.1. Culture’s role in international consumer behavior

1.2. Material culture and its influence on consumer behavior

1.3. Language as a key to cultural differences in international marketing

1.4. Reference groups impact on consumer behavior and international growth strategy

2. Managerial Implications

2.1. A-B-C-D Paradigm

2.2. Diffusion theory and adaptation process

2.3. Self-reference criterion

2.4. Culture and marketing mix

2.5. Cross-cultural comparison

2.6. Recommendations

Conclusion

Introduction

Nowadays every company which succeeds in its home-market is going to become international. All these organizations hope to make their best in other countries, to find new consumers and maximize profit. Global market can give your company a massive income or lead to losses. It depends on enormous number of factors, which should be taken in account. However, it is one crucial and complicated parameter influencing the whole international marketing strategy - cultural differences.

Buyer behavior and consumer needs are much ruled by cultural norms and settings. Companies who did not care about making qualified cross-cultural research beforehand were defeated and lost their money, time and sometimes even reputation. Prior to become international you should analyze countries consumer’s mindsets well. It is too risky to invest in international growth marketing strategy without good knowledge of cultural environment. This factor effects the way of distribution, package design and size, name of product, its price and promotion. It is seen that cultural differences influence the global marketing mix program.

International consumer behavior topic is really difficult and laborious, because in every situation you should take in mind a number of cultural characteristics. Even if you have data about some cross-cultural research made in a region of your interest, you should interpret it on the assumption of company’s field of business.

In this paper, by using the example of Wal-Mart, will be described and analyzed how cultural differences influence on international growth strategies. The main topic of this study is cultural differences place in international consumer behavior. It is planned to achieve several goals:

§ To find out elements of culture effecting international consumer decision making process;

§ To verify what factors played a big role in Wal-Mart international growth strategies in different countries;

§ To figure out how these cultural parameters worked and influenced the international consumer behavior in Wal-Mart case;

§ To review the basic Hofstede cultural indexes in relation with Wal-Mart future growth strategy;

§ To characterize culture of the main countries which markets are going to be entered by Wal-Mart;

§ To make some recommendations on Wal-Mart international growth strategies

This paper consists of 2 parts: Practical Application of Theory, where the main characteristics of culture and their impact on consumer behavior in Wal-Mart case will be presented, and Managerial Implications, where working international marketing theories are going to be described and analyzed on the base of current example.

Practical Application of Theory

1.1. Culture’s role in international consumer behavior

First of all it is important to figure out what we should consider as «culture» in the context of international marketing. According to W.J. Keegan culture can be defined as «way of living, built up by a group of human beings that are transmitted from one generation to another» (3).

If we analyze this definition on the topic of marketing and consumer behavior it means that every member of society has a lot of different attitudes, beliefs, values, perceptions, which he holds. But at the same time usually he cannot explain why. The answer is one – it is accepted in his circle. Our culture is formed by family, friends, neighbors, school, government and other social institutions. Our culture dictates us what we want to buy, what is good or, for example, fashionable. So cultural characteristics makes us to behave one way, they determine what products we buy (expensive/cheap/ with sales, bio/GMO, healthy/ fast food), in what places (local shops/ huge malls/ brand shops/ supermarkets), from what manufacturers (native producer/ foreign), in what package (small/ huge), how often we go shopping and how many stuff we purchase.

Usually culture settings in neighbor countries are closer. That is why most companies, who are international now, made their first steps there. This way also behaved Wal-Mart. Wal-Mart decided to concentrate heavily on establishing a presence in the Americas: Canada, Mexico, Brazil and Argentina. Canada is near the USA, these countries citizens’ values and styles of buying are rather similar. Moreover, Canada had a business environment closest to US. It was the easiest entry destination. It was no problems with language, specific preferences or aesthetics.

In case of Wal-Mart it was very risky to start their internalization from European countries. Company was afraid of facing cultural differences, which they cannot anticipate, and high level of competitiveness for market share. Moreover, another problem was that it would be really difficult to change citizen’s way of purchasing. For example, in France and Germany consumers prefer to go shopping several times per week. They would like to buy fresh products, in small amounts and in local chain stores. Once a week or even rarer they go to a big out-of-town supermarket, but it is also a question of habits. Europeans are not heavily opened to new things and innovations. Why should we go to Wal-Mart instead of Metro? Why should we change our way of life? A problem how to convince Europeans and adapt to their style of consumer behavior was the biggest one, stopping Wal-Mart of entry to this market.

As for Asian market it is too different culturally as well. Wal-Mart marketing managers were afraid to loose their money, because of misunderstanding. It would have taken considerable financial and managerial resources to establish a presence in Asia. Only some years later Wal-Mart became ready to try entry to Chinese market. China’s cultural, linguistic and geographical distance from the USA presented relatively high entry barriers. That is why company started their business in Asian by making partnership with domestic retailers. Wal-Mart just sold their low-price products to them, distribution was their problem. Only after that, having some experience, company finally made a joint venture with Asian organization and opened 3 stores in Hong Kong.

Obviously, Wal-Mart managers made a right choice to enter culturally and geographically closest regions. On the stage of growth and becoming international company avoided material losses. Work in America’s countries gave Wal-Mart experience in making international business taking into account cultural differences and their influence on consumer behavior. So Wal-Mart growth strategy was totally acquitted at the moment.

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